ASIC doesn’t support minimum account balances for SMSFs

ASIC - SMSF minimum balance, retirement, longevity riskASIC has said it is “not supportive of minimum account balances on SMSFs” in a second round submission to the Financial System Inquiry.

SMSF minimum balance

While ASIC doesn’t support a minimum balance requirement for SMSFs, there are alternatives which it could support. “There may well be a role for introduction of either a ‘soft’ minimum balance for SMSFs or guidance on an appropriate minimum balance,” said ASIC. According to the submission this could include a minimum balance being required unless “certain requirements are satisfied”, or an adviser having to justify the recommendation on an ‘if not, why not’ basis.

It is also worth considering if better information can be given to potential SMSF members about the cost-effectiveness of SMSFs, “for example, Statements of Advice in relation to SMSFs could be subject to a requirement to set out the operating costs of an SMSF compared to the cost of staying in the client’s existing APRA-regulated fund,” said ASIC.Read More »ASIC doesn’t support minimum account balances for SMSFs

Longevity risk a “major weakness” of retirement system: Actuaries Institute

Longevity risk - retirementThe Actuaries Institute has called longevity risk a “major weakness of Australia’s retirement income system”, in a submission to the Financial System Inquiry.

The second-round submission to the Financial System Inquiry also covers superannuation and retirement policy, retirement income products and fees of super funds.

Superannuation and retirement policy

The Actuaries Institute “agrees that there is no legislative or formal statement of the guiding objectives for the retirement income system”. Such a “policy blueprint is essential if we are to effectively assist our ageing population”, as:

“In Australia we currently have a large superannuation system that focuses on wealth accumulation but lacks the same focus on retirement income streams that will sustain retirees’ future living standards. The current system is complex and individuals often lack the financial skills to make critical decisions about retirement funding.”

Read More »Longevity risk a “major weakness” of retirement system: Actuaries Institute

SMSF submission to the Financial System Inquiry

Financial System Inquiry submission - SMSF

This submission will focus on three questions raised by the Financial System Inquiry interim report:

  • Restoring “the general prohibition on direct leverage of superannuation funds on a prospective basis”
  • “To what extent should the Inquiry be concerned about the high operating expenses of many SMSFs?”
  • “Should there be any limitations on the establishment of SMSFs?”

Leverage in superannuation funds

Given that the Financial System Inquiry (FSI) interim report notes “leverage in APRA-regulated funds is small, with total borrowings of under $2 million reported each quarter over the past year” this submission will be limited to consideration of borrowing by SMSFs.

Borrowing by SMSFs has been a growing and changing area, which has also caused concern in some sectors. This includes the Super System Review (Cooper Review) panel, which recommended that a review of SMSF borrowing be conducted within two years – which would have been by 2012:

“The 2007 relaxation of the borrowing provisions and the consumer protection measures that have recently been announced should be reviewed by government in two years’ time to ensure that borrowing has not become, and does not look like becoming, a significant focus of superannuation funds.”

Read More »SMSF submission to the Financial System Inquiry

Guidance needed on wholesale investor test for SMSFs, says SPAA

Further guidance SMSF retail/wholesale investor test, SPAASPAA has welcomed the statement by ASIC regarding the “treatment of an SMSF as a wholesale or retail investor”.

“It would appear that the announcement by ASIC on 8 August is to clarify the fact that the threshold to determine whether the trustee of an SMSF is a wholesale or retail investor has been reduced from $10m to $2.5m”, says SPAA.

While welcoming the announcement by ASIC, SPAA “believes that further guidance is required to be issued by ASIC on what constitutes a wholesale investor”.

“While the legislation may prescribe various amounts there are no regulations to indicate how those amounts are to be calculated”, says SPAA.

Read More »Guidance needed on wholesale investor test for SMSFs, says SPAA

ATO SMSF trustee webinars: August/September 2014

ATO SMSF webinarsThe ATO has announced another round of webinars aimed at SMSF Trustees, including:

  • Self-managed super funds for trustees – an overview
  • Self-managed super funds – accepting contributions and managing investments
  • Self-managed super funds – accessing your super

Self-managed super funds for trustees – an overview is the ATO-provided course eligible to fulfill a SMSF trustee Education Direction, the other authorised option being provided by CAANZ/CPA.

Read More »ATO SMSF trustee webinars: August/September 2014

Tax super contributions progressively, says Per Capita

Per Capita - progressively taxed super concessional contributions, longevity riskTaxing concessional superannuation contributions progressively is one of the recommendations of a report into Australia’s retirement income system.

The report, The Entitlement of Age, was written by Emily Millane, “Per Capita’s principal research fellow working on the Longevity and Positive Ageing project”.

According to Millane “Australia’s retirement income system is becoming unsustainable”, though this is “not because too much money is spent on the age pension”. Instead it is because “the proposals currently in the budget will make the pension inadequate, and the retirement income system more regressive”.

This is exacerbated by increasing life spans, with the analysis by Per Capita showing that “Australian life expectancies have consistently outstripped official projections due to rapid declines in mortality”. According to the report:

“A comparison between average life spans and official projected life expectancies using steady mortality rates produces a difference of approximately 8 years for men and 12 years for women.”

Read More »Tax super contributions progressively, says Per Capita

No “unexpected detrimental changes to super”, says Ciobo

unexpected detrimental changes to superannuation, says Ciobo“We won’t make any unexpected detrimental changes to superannuation” said Steven Ciobo, the Parliamentary Secretary to the Treasurer, in a speech to the Group Insurance Summit 2014. Ciobo used the speech to outline the strengths of the superannuation system and the Government’s proposed changes.

Four facts about superannuation

Ciobo listed what he sees as the “four key facts about superannuation”:

  1. Superannuation is the “financial system’s second-largest sector after banking”
  2. “Financial assets held in the superannuation system were 50 per cent of those of the banking system in 1997, but grew to 60 per cent by the end of 2013”
  3. “Superannuation assets are around six times their level in 1997”
  4. “Australia has the fourth-largest pool of superannuation assets in the world, and is one of only a few countries with pension assets worth more than annual Gross Domestic Product”

Read More »No “unexpected detrimental changes to super”, says Ciobo

Superannuation assets pass $1.85 trillion, says APRA

APRA superannuation statistics: $1.85 trillionThere was over $1.85 trillion in superannuation at the end of the 2013/14 financial year, according to APRA. This is one of the figures released by APRA in the June 2014 Quarterly Superannuation Performance statistics.

As at June 2013 total superannuation assets totaled $1.6 trillion, but rose by 15.3% to reach $1.85 trillion by June 2014. However over the June 2014 quarter total superannuation assets only rose by 2.6%.

Approximately 67% of this $1.85 trillion in assets is held by large APRA funds, with another 30% held by SMSFs.

Read More »Superannuation assets pass $1.85 trillion, says APRA

In-house asset rules a “trap” for advisors & trustees, says SPAA

Superannuation, SMSF In-house asset rulesThe superannuation in-house asset rules are a “trap for SMSF advisors, trustees”, according to the SMSF Professionals’ Association of Australia (SPAA).

The in-house asset rules “pose one the biggest pitfalls for SMSF trustees and their professional advisors”, says Graeme Colley, Director, Technical and Professional Standards of SPAA.

Colley refers to the in-house asset rules as “one of the most complex set of investment rules in the SIS legislation”. The rules result in a “significant number of breaches of the legislation”, which exposes “trustees to the dangers of significant penalties, non-compliance of the fund or possible disqualification as a trustee”, said Colley.

Read More »In-house asset rules a “trap” for advisors & trustees, says SPAA

BGL announces Simple Fund 360 now integrates with Xero

BGL Simple Fund 360 integration with XeroBGL Corporate Solutions have announced their software, Simple Fund 360, now integrates with Xero’s cloud accounting software.

According to BGL, this integration will allow users of Simple Fund 360 to “connect directly with Xero and seamlessly import bank transactions”. BGL claims Simple Fund 360 “is the first SMSF administration software provider to enable this type of connectivity”.

“Of the 500 plus firms using Simple Fund 360, we know a large percentage also use Xero. The integration expands the bank data capability of Simple Fund 360 as well as providing clients with a single interface to administer their bank data”, says BGL Managing Director Ron Lesh.

Read More »BGL announces Simple Fund 360 now integrates with Xero